Business Maryland Line Politics Top News — 24 October 2012
By
Capital News Service

BALTIMORE – Stu FitzGibbon, the refinery manager of the Domino Sugar plant in Baltimore, was wearing a Domino sweatshirt on a recent fishing trip.

“I went into a shop to buy some bait,” FitzGibbon recalled, “and a guy sees my shirt and said to me, ‘Oh I love the sign, too bad they’re not still open.’”

The Domino sugar refinery, with its iconic red neon sign, is still open, but the confusion is understandable.

Domino is the last major manufacturer still operating in Baltimore’s Inner Harbor. Long gone are Domino contemporaries and former Inner Harbor icons like Western Electric, Allied Chemical, and Procter & Gamble. They’ve been replaced, to the extent that they have, with service sector giants like Legg Mason, Morgan Stanley and Hilton.

“The ability of a blue-collar worker to earn a good living is only in manufacturing, you don’t go to the service sector for that,” FitzGibbon said.

Domino still operates in Baltimore for a number of reasons: First, they’ve updated their facilities, their methods and their products. Second, their location on the Inner Harbor is ideally suited to their business. And finally, Domino and the rest of the sugar industry have lobbied aggressively to maintain sugar price guarantees from the federal government that help American producers compete with foreign rivals.

Domino has been operating in Baltimore’s Inner Harbor for 90 years (the sign is 61 years old). Much of the plant shows its age. Walls and stairways are dingy with industrial grime, heavy steel fire doors have been in place since the 1920s, and some original machinery is still in use, helping to process 6.5 million pounds of raw sugar a day.

But looks can be deceiving. The plant, which recently invested $2 million in new clean air technology, presents a remarkable dichotomy between an aging industrial behemoth and cutting-edge technological innovation.

Two of Domino’s five boilers were installed when the plant switched from fuel oil to natural gas in the early 2000s. That natural gas fuels an on-site power plant with a 17-megawatt capacity that not only powers the entire refinery, but is also capable of selling power back to the grid.

“We’ve reduced the cost of operation by reducing energy consumption,” FitzGibbon said. And while they’ve also reduced the size of their workforce to about 600 from over 1,000 a generation ago, the company says they’ve done it through attrition rather than layoffs.

Domino’s packaging warehouse looks nothing like the rest of the refinery. High tech machinery spits out more than 350 billion single-serving sugar packets per year. The conveyer belt moves so fast that you need a strobe light to see the packets fly by.

Sugar packets are just one of the 40 different final products–retail and bulk–that the factory produces. FitzGibbon said that the move to an array of value-added products is crucial to remaining profitable.

The refinery in Baltimore produces not just granulated, powdered, and brown sugars, but also flavored sugars, pharmaceutical grade sugars, and other specialty products in a variety of packagings.

The plant in Baltimore is the only one in the country that produces sugar in retail-sized plastic tubs, as opposed to bags, negating the need for a sugar jar.

“They’ve been able to stay on the cutting edge of innovation and by doing so, that’s made them remain competitive in this business,” said Jennifer Vey, a fellow at the Brookings Institution who has analyzed Baltimore manufacturing.

The refinery has its own machine shop to make replacement parts for equipment that is long out of production. Melding these geriatric machines with their newer technology into a cohesive production unit is no easy feat.

“Making sugar–it seems like it’s not rocket science,” said Ann-Margaret Deavers an environmental engineer at the Domino plant, “but actually it is.”

A few times a month, a giant tanker ship docks at the Domino plant. Unloading the raw sugar from the ship, at 10 million pounds per day, usually takes about a week.

The sugar travels by a conveyor belt, swarming with feasting bees, to a massive hangar that can hold up to 100 million pounds of sugar in piles over 60-feet high.

The raw sugar then travels by conveyor belt through a byzantine array of filtration devices and methods–affination, centrifuges, carbonation, charification, vacuum boilers, granulators–up and down the eight stories of the plant, before being stored in silos to await packaging.

One of the other reasons for Domino’s continued success may be harder to replicate–its location. The refinery sits on the junction of Baltimore Harbor, where its raw materials come in, and Interstate 95 and the B&O Railroad, which take out its finished products.

“We have deep water berth with railroad and highway access,” FitzGibbon said. “This is why throughout history you see wars over ocean access, it’s very valuable property and we don’t want to give this up because somebody wants to build a condo with a view.”
The refinery is also less than two hours from Hershey, Pa., the home of one of their biggest and longest-standing customers.

The average Domino employee in Baltimore makes $57,000 per year, plus benefits, according to a company spokesman. Obviously, this is significantly more than foreign sugar workers are paid. But there are other economic advantages that have helped keep Domino here.

Unlike other major agricultural industries (corn, cotton, etc.) sugar farmers and producers do not receive any direct payments from the U.S. government. They do however, receive indirect subsidies in the form of price guarantees and limits on imported sugar. Domino and its competitors have lobbied and paid dearly to keep those subsidies.

American Sugar Alliance, a group funded in part by Domino’s parent company, has spent $750,000 lobbying the government so far in 2012, according to Senate lobbying records. In 2011, they spent $1.5 million.

The three biggest spending (non-tobacco) agribusiness lobbyists this year are all sugar related, as are five of the top 10.

Critics of of the U.S. sugar program argue that the import limits artificially raise sugar prices and constitute a hidden tax on the public to the tune of billions of dollars a year in higher food costs.

Jack Roney, the director of economics and policy analysis at the American Sugar Alliance, disagreed, arguing that every sugar producing country subsidizes their growers. Roney said it’s crucial for American sugar producers to have a price guarantee program that keeps them on a level playing field.

“The stability of raw sugar and refined sugar prices gives them more business certainty than they would have if they were thrown to the vagaries of the incredibly volatile world market,” Roney said. “So, I would argue that it’s extremely important to the survival of that one last manufacturing operation in the Port of Baltimore.”

Going forward, Domino’s willingness to innovate, its established supply chains, and its accumulated capital and expertise in the industry are what will keep it in Baltimore.

“You don’t just build a sugar refinery,” FitzGibbon said, citing Domino’s ideal location and the nearly $1 billion cost of replicating its facilities. “You don’t just plop one down.”

But none of that stopped Domino’s parent company, American Sugar Refining, from closing down an even larger Domino refinery in Brooklyn in 2004 soon after they acquired the Domino brand.

The larger a company gets–and American Sugar Refining is the largest sugar company in the world–the more tenuous its ties become to its local branches.

“I’ve seen companies leave that had nothing to do with their productivity, nothing to do with how good they were,” said Michael Galliazo, president of the Regional Manufacturing Institute of Maryland. “At a much higher corporate level, somebody just decided they didn’t want that company in Maryland any longer.”

After making over $9 million in capital improvements to the Baltimore plant in 2011, Domino, it seems, doesn’t plan on going anywhere.

 

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About the Author

David Gutman is a graduate student at the University of Maryland’s Philip Merrill College of Journalism. He has written for The Current Newspapers in Washington, D.C., The Prince George’s Sentinel, and Sports Northwest magazine. He graduated cum laude from Colby College with a degree in government and art history.